CFA Institute talks about the ICO Bubble

in #cryptocurrency3 years ago

CFA Institute talks about the ICO Bubble

The CFA Institute posted an article talking about the ICO Bubble.

The CFA Institute is likely the most reputed institute in Finance Certification and they set global standards on best practices in the financial world.

Basically they state in the document that the reason ICOs are pumping is because there are a lot of people overexposed in Bitcoin, for two main reasons:

#1 - Cashing out of Bitcoin is Harder

We all know that Bitcoin mining is concentrated in China, and mining farms gave rise to many whales. These whales have large sums of bitcoin and lately the Chinese government made it harder for people to cash it out in fiat currency.

Now bitcoin exchanges are obliged to follow more strict KYC policy and request deeper information on its users.

In other words, it became practically harder to cut exposure on bitcoin.

#2 - Bitcoin Pricing in Anticipation to the Scaling Debate

They argue that the current Scaling Debate is leveraging bitcoin prices. They say that the scaling debate is the last milestone before bitcoin going mainstream, and as such, many people are trying to acquire exposure on it beforehand.

Facts

Basically the CFA Institute believes that huge bitcoin holders are "trapped" with bitcoin and are flushing it out on ICOs.

Although their reasoning is quite sound, I can't find many facts to support their statement that whales are the ones buying ICO tokens.

Au contraire actually. I've heard several times that the average investment in an ICO is as low as 250 usd.

On Corey Petty's blog he brings us a close look into several ICOs investors distribution:

This article about the Status ICO shows us that roughly 55% of initial public investors invested less than USD 30k on it.

The articles about the BAT Token, the Aragon ICO and the Gnosis ICO show that tokens are more concentrated on investors with USD 300k+ initial investments.

The CVC Civic ICO was hard capped on USD 5k per verified user (as opposed to address).

All these ICOs raised more than USD 20 million each. Technically we found more evidence supporting the CFA Institute's claims than our own. It is worth noting though, that both Status and Civic ICOs took place more recently than all the others, and it is very likely that Civic has set a new standard concerning ICOs best practices.

Conclusion

I particularly feel that whoever is trying to cut exposure o bitcoins won't go to ICOs to do so. ICOs are much riskier than handy alternatives such as Ethereum, Ripple or Litecoin. Moreover, stating that the Scaling Debate is leveraging prices is highly subjective.

Even though, we found little evidence on whether ICOs are or aren't taken mostly by whales. The evidence we found points towards whales, but I believe things are changing rapidly and our sample is too small to infer a general conclusion.

We intend on further studying this issue using the methodology proposed by Corey Petty in his articles.

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Very interesting take on the ICO bubble. I didn't realize that most of the mining occurred in China, so it makes sense that a lot of money would flow into the alt coins due to the slew of regulations. Thanks for the info!

Thanks for the support ! hope to help further. Cheers !

Good content, well written too. In my view the scaling debate really is a double edged sword, if BTC's fork goes smoothly and Segwit ends up being deployed without drama, then we could see more smart money coming in. However, I fully expect more blood in the weeks leading up to August 1st because of the FUD generated by a possible chain split. If we end -up with two or more version of Bitcoins, then a cyber-war could ensue and wreck prices.

I've just followed you by the way, keep the good stuff coming!

@tradealert, good points on the following events. I guess you're right, and I definitely agree with you that there is more blood on its way. Eager for the resolution to come !

Same here, I guess I'll be receiving the new trade alerts right on my feed !

Thanks a lot for the support. Cheers

@pedrombraz
Nice Job!
Keep the good work up!
Thanks for sharing

Cheers ! Hope to help further, keep an eye for th following posts !

You do realise that Ethereum Ripple etc.. were all ICO'd as well right?

I am, but you have to agree with me that it was a different cryptoworld back then right? people buying into ICOs for different reasons, with a whole other level of expertise, and the sort ... what do you think ?